January 1, 2017: Mega Corporation issued 20 year, 9% bonds with a face value of 2,875,000. The bonds were solid yield 8%. Interest is payable semi-annually on January 1 and July 1.
1. What is the issue price of the bonds (please show all work) ?
2. Using EXCEL, prepare an amortization table for the entire bond term. (Table should be properly labeled and neatly presented. Amounts should have commas and be rounded to the nearest dollar)
3. Record the bond issuance on 1/1/17.
4. Assume the company prepares financial statements semi annually on June 30 and December 31. Prepare the apropriate adjusting entries for June 30, 2017 and December 31, 2017 for interest and for amortization of the discount or premium. Use effective method amortization
5. What accounts related to this bond would be shown on the 12/31/17 balance sheet. Show in the proper sections
Liabilities
Current Liabilities:
Long-term Liabilities:
January 1, 2017: Mega Corporation issued 20 year, 9% bonds with a face value of 2,875,000. The bonds were solid yield 8%. Interest is payable semi-annually on January 1 and July 1.
1. What is the issue price of the bonds (please show all work) ?
2. Using EXCEL, prepare an amortization table for the entire bond term. (Table should be properly labeled and neatly presented. Amounts should have commas and be rounded to the nearest dollar)
3. Record the bond issuance on 1/1/17.
4. Assume the company prepares financial statements semi annually on June 30 and December 31. Prepare the apropriate adjusting entries for June 30, 2017 and December 31, 2017 for interest and for amortization of the discount or premium. Use effective method amortization
5. What accounts related to this bond would be shown on the 12/31/17 balance sheet. Show in the proper sections
Liabilities
Current Liabilities:
Long-term Liabilities:
Related questions
QS 14-7 Recording bond issuance and discount amortization LO P1, P2
Sylvestor Company issues 10%, five-year bonds, on December 31, 2016, with a par value of $110,000 and semiannual interest payments.
| Semiannual Period-End | Unamortized Discount | Carrying Value | ||||||
| (0) | 12/31/2016 | $ | 8,200 | $ | 101,800 | |||
| (1) | 6/30/2017 | 7,380 | 102,620 | |||||
| (2) | 12/31/2017 | 6,560 | 103,440 | |||||
Use the above bond amortization table and prepare journal entries to record
(a) the issuance of bonds on December 31, 2016
(b) the first interest payment on June 30, 2017
(c) the second interest payment on December 31, 2017.
Exercise 10-4 Straight-Line: Recording bond issuance and discount amortization LO P1, P2
Paulson Company issues 6%, four-year bonds, on December 31, 2017, with a par value of $90,000 and semiannual interest payments.
| Semiannual Period-End | Unamortized Discount | Carrying Value | ||||||
| (0) | 12/31/2017 | $ | 6,533 | $ | 83,467 | |||
| (1) | 6/30/2018 | 5,716 | 84,284 | |||||
| (2) | 12/31/2018 | 4,899 | 85,101 | |||||
Use the above straight-line bond amortization table and prepare journal entries for the following.
(a) The issuance of bonds on December 31, 2017.
(b) The first interest payment on June 30, 2018.
(c) The second interest payment on December 31, 2018.
